Stocks were poised to close lower for the sixth-straight session Wednesday amid concerns over the recovery following Ben Bernanke's grim economic outlook and after the Fed's latest Beige Book stated that several regions showed signs of a slowdown.
The Dow Jones Industrial Average slipped almost 40 points, following a day where stocks finished down for the fifth straight sessionTuesday.
Oil giant ExxonMobil led the blue-chip leaders, while Cisco and Alcoa dragged.
The S&P 500 and the tech-heavy Nasdaq were trading lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, advanced above 18.
The Dow and the S&P have not closed higher this month and have declined approximately 4 and 4.5 percent, respectively.
Among the key S&P sectors, materials and techs sagged, while energy advanced.
Growth slowed in some U.S. regionsduring May, due to higher food and energy costs as well as supply disruptions stemming from Japan's earthquake took a toll, according to the Fed's periodic "Beige Book" summary.
This follows a late-session market selloff Tuesday after Bernanke said the U.S. economy had suffered a "loss of momentum"but that he still expected growth to pick up again, making a third round of quantitative easing unnecessary.
Bernanke’s cautious tone that the economy is well-below its potential is worrying investors, according to Scott Brown, chief economist at Raymond James.
“There’s belief of a temporary slow patch and things are still going to be far below our potential and as such, the Fed’s going to be accommodative for now,” said Brown.
Brown said he expects a “long summer” ahead for the market, but long-term prospects are “still looking strong” for investors who are willing to be patient.
Meanwhile, strategists at Capital Daily said QE3 is unlikely this year and that equities are "likely to struggle"—with the S&P falling to 1,200 by year-end—even if the economy picks up.
Oil prices rallied after OPEC unexpectedly left its production levels unchanged and following a weekly government report that showed crude inventories fell more than expected. U.S. light, sweet crude gained $1.65 to settle at $100.74 a barrel. London Brent Crude gained $1.07 to settle at $117.85 a barrel.
ExxonMobil gained after the Dow component said it made several major oil and natural gas discoveries in the deepwater Gulf of Mexico.